Is A Balanced Scorecard Bad?

Over in the PMA Forum, Alan Meeks asks why anyone would want to have a balanced scorecard.At first blush, this is a somewhat shocking question.After all, who wouldn’t want a balanced scorecard?

As I replied in my own posting, the original intent of the term balance was to remind people not to focus exclusively on financial objectives and metrics. As in, balance out your thinking.It’s hard to argue with this idea – motherhood and apple pie, as Alan might say.The problem is that most Balanced Scorecard practitioners have interpreted this idea to mean that all perspectives, all objectives, and all metrics should have equal weight. Technically, balance does indeed mean equal weight but I think that this is fundamentally flawed thinking.In some cases, it may be better to be imbalanced.

For example, imagine an early stage company that already has seed funding and the beginnings of a product but do not yet have their first customer. In this situation, we probably want to emphasize the customer and employee objectives more than the financial and process ones.It’s not that financial matters aren’t critical and that we don’t want repeatable processes.It’s just that – for the time being – we want more of the company’s collective energy on customers.

Of course, that’s just my philosophy.You may have different priorities.Which is exactly my point.Create imbalance by weighting those things that are important to you.

While I’m railing on the word balance, I might as well also complain about the other word in the phrase “Balanced Scorecard”. The term scorecard has encouraged practitioners to think that the most important part of a balanced scorecard deployment is metrics (or KPIs) — i.e. the things that keep score. Unfortunately, metrics by themselves are unlikely to increase the performance of an organization. In fact, there is another balance needed; one that recognizes that metrics must be accompanied by objectives and initiatives.

This is indeed true. A balance score card can give unequal weights to the four perspectives, but it can still give an effective overview of strategy and its implementation. This is because, businesses at different stages in their life cycles would have to focus more on a few of these four key perspectives. I agree with you.